- In East Africa, cargo transportation costs are exorbitant, ranking among the highest globally
- High logistics costs translate to expensive basic commodities like food across the continent
- Tech startups are collaborating with various stakeholders to enhance infrastructure and simplify trade, manufacturing, and logistics processes
In East Africa, cargo transportation costs are exorbitant, ranking among the highest globally. A Shippers Council of East Africa (SCEA) survey in 2021 revealed that transporters who use the Northern Corridor, a trucking route serving countries like Kenya, Uganda, Rwanda, Burundi, the DRC, and South Sudan, incur an estimated cost of $1.8 per km per container.
This figure is almost double the global average of $1 per km per container, making logistics complex and expensive for African businesses. The situation has been worsened by the current record-high fuel prices in Kenya, Uganda, and other East African countries.
To add to this, poor infrastructure in several parts of Africa, tax requirements, and inefficiency in clearing goods at ports and borders are significant contributors to logistics challenges.
These high costs translate to expensive basic commodities like food across the continent, with one study indicating that it costs up to five times more to move goods in some African countries, like Nigeria, than in the US.
The African Development Bank (AfDB) estimates that high transport costs add up to 75% to the price of African goods. Despite the challenges, technology offers an opportunity to transform the logistics market.
Startups filling logistics gaps
With concerted efforts from governments, regulators, and companies, startups are emerging, bridging the gaps in Africa’s logistics market. These startups offer a glimpse into the future of tech-enabled logistics and transportation on the continent.
Tech-based logistics solutions such as Lori and Sendy are being developed to cater to the unique complexities of the African market. These startups are collaborating with various stakeholders to enhance infrastructure and simplify trade, manufacturing, and logistics processes. The ultimate goal is to bring significant improvements to the logistics landscape in Africa.
Can Technology Provide a Solution?
Uganda’s economy has grown at a rate of 3.3% in 2020, despite the challenges posed by the COVID-19 pandemic, leading to an increased need for reliable and efficient logistics. However, businesses are struggling to meet this demand, limiting their ability to expand and reach new markets.
The lack of reliable and efficient transportation infrastructure and the high cost of transportation are the biggest challenges facing businesses in Uganda. Logistics costs can be prohibitively expensive, particularly for businesses operating in rural areas. This has made it difficult for these businesses to compete with larger, more established companies that have better access to transportation networks.
Technology has the potential to play a significant role in accelerating access to reliable and efficient logistics and fulfilment for businesses in Uganda. By using e-commerce platforms and mobile applications, businesses can reach new markets, manage orders, and streamline logistics operations, reducing costs.
Despite the challenges faced by small businesses, companies such as Sendy are democratizing logistics in the region by providing technology solutions that enable businesses to easily move goods across different locations.
This helps entrepreneurs to optimize their supply chain and focus on scaling the businesses, overcoming the high cost of logistics and the delays in delivery that have been holding them back.
In today’s fast-paced and competitive business environment, technology is the key to unlocking new levels of efficiency and success. With the help of tech solutions, businesses can optimize their supply chains, reduce costs, and deliver goods to customers faster and more efficiently.
Read: Trends shaping the future of logistics in African markets